Your company is considering two mutually exclusive projects A and B. Project A requires an initial...
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Your company is considering two mutually exclusive projects A and B. Project A requires an initial investment of $1M at t = 0, and starting at t = 1 makes constant perpetual annual cash flows equal to Q. Your boss tells you that Project A has an IRR of 15% and an NPV of $500,000. Project B has the same level of risk as project A, and thus has the same cost of capital. Project B requires an initial investment of Z at t = 0, and starting at t = 3 makes constant perpetual annual cash flows equal to $250,000. What is the minimum IRR on Project B that would make you want to choose Project B over Project A? Your company is considering two mutually exclusive projects A and B. Project A requires an initial investment of $1M at t = 0, and starting at t = 1 makes constant perpetual annual cash flows equal to Q. Your boss tells you that Project A has an IRR of 15% and an NPV of $500,000. Project B has the same level of risk as project A, and thus has the same cost of capital. Project B requires an initial investment of Z at t = 0, and starting at t = 3 makes constant perpetual annual cash flows equal to $250,000. What is the minimum IRR on Project B that would make you want to choose Project B over Project A?
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Related Book For
Intermediate Financial Management
ISBN: 978-1285850030
12th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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